Page 55 - Bankruptcy Volume 1

Other debtors have attempted to avoid the exacting requirements of Section 503(c) by arguing that
longstanding bonus or pension plans are ordinary course business programs that are excluded from the
ambit of Section 503(c)(3) because the goal and purpose of the plan is not the retention of insiders.

Administrative Insolvency

The ultimate goal of a Chapter 11 reorganization is for the debtor to reemerge from bankruptcy with
profitability and stability. Therefore, throughout the Chapter 11 case, the debtor or trustee is trying to
avoid administrative insolvency. Administrative insolvency is the inability of a debtor in bankruptcy to
pay its administrative expenses, such as its postpetition trade creditors, postpetition rent, attorneys’ fees,
and other professional fees. Administrative claims must be paid in full as a condition to confirmation of
a Chapter 11 plan of reorganization, unless administrative creditors agree to less than full payment.
Therefore, administrative insolvency usually results in conversion of the case to a Chapter 7 liquidation.

© 2020 Association of International Certified Professional Accountants 53